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New Health Insurance Rules Give Small Business Employees More And Better Choices

Sky-high costs under the current health care system have squeezed small businesses and people who work for themselves. Unlike large employers, which are allowed under federal law to design their own plans, small entities must adhere to stricter coverage mandates and have less ability to customize plans.

An estimated 15 million Americans — and their families — who are self-employed or work for a small business lack health care coverage. It’s not because they don’t want insurance. Rather, they don’t have a coverage option that fits both their needs and their ability to pay.

All that is about to change.

The Labor Department recently rolled out a new rule on association health plans (AHPs) that will allow small businesses and the self-employed to act within the same, flexible health care rules as a large business.

AHPs allow small businesses and the self-employed to band together and obtain a health plan as a group. AHPs had previously been allowed based on shared industry.

But now AHPs can form based on geographic features, like a common state, city, county or metropolitan area, and across state lines as well. Self-employed individuals without employees, including sole proprietors, can now join an AHP.

“Today is a great day for America’s franchise job creators and their employees in the fight for high quality, less expensive health coverage,” said International Franchise Association President and CEO Robert Cresanti when the new rule was finalized June 19.

He added that it paves the way “for franchise businesses to utilize AHPs and make the delivery of products and services more affordable for small business owners, employees and their customers.” He’s right.

For some, however, the new flexibility is cause for concern, particularly as it relates to potential inequities in care.

In practice, flexibility expands choices. Forcing people to pay for benefits they don’t want, on the other hand, drives up costs. It can even prevent people from buying insurance at all.

Moreover, many of those who join forces to form AHPs will offer generous plans, so they can compete for talent with larger companies offering health benefits.

The Congressional Budget Office estimates that 4 million Americans, including 400,000 who would otherwise be uninsured, will join an AHP by 2023. Expanding choice this way encourages people to sign up for coverage.

With this rule, new businesses will now have the chance to join an AHP. Chambers of commerce can get a plan for their members, and leagues of Uber drivers can form associations and get insurance.

There will be more coverage options, enhanced ability to self-insure, less regulatory burden and complexity, and reduced administrative costs. And, as we all know, when there are more consumers and more competition, prices will drop.

Small Businesses Get Flexibility

An AHP group can also now negotiate prices with payers and providers. While they can’t charge an individual a higher premium based on pre-existing health conditions, they can base premiums on factors such as age, industry and employee classification.

Giving small businesses and self-employed individuals a more even playing field with large businesses also means AHP members will have to play by the same rules. Consumer and anti-discrimination protections will apply.

While this rule may not represent sweeping reform, it is a step in the right direction.

The Trump administration should continue its progress by adding a final rule to allow for renewal of short-term, limited-duration plans. That’s prohibited under current rules.

That will bring America closer to the ultimate goal of delivering better health care coverage at lower prices for all.

Nascimento is the executive vice president of Freedom Partners Chamber of Commerce.